Salaries and perks
Querist : Anonymous
Can he claim any exemption for HRA under Section 10(13A)of Income tax act, 1961 or the whole HRA is taxable as he is also having RFA ?
Querist : Anonymous
When an employee receives both HRA and Rent-Free Accommodation (RFA) from the same employer, the tax treatment is as follows:
HRA exemption under Section 10(13A) is allowed only if the employee actually pays rent to a landlord (third party).
If the employee is getting Rent-Free Accommodation (RFA) from the employer, then HRA exemption is generally not allowed, because there is no rent payment made by the employee.
Moreover, RFA is itself a taxable perquisite under the head “Salary” and taxed on the basis of its valuation (depending on city and salary).
So practically:
HRA received will be fully taxable if the employee also enjoys rent-free accommodation.
The value of rent-free accommodation will be added to taxable salary as per perquisite valuation rules.
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